Professor of Economics and Senior Scholar in the School of Global Environmental Sustainability

Water Scarcity and Economic Growth in Wyoming

Project Summary

The persistence of drought conditions over much or all of the state of
Wyoming in recent years has raised concern as to whether water availability
relative to use may be limiting economic growth and development in certain
regions or even state-wide. This purpose of this research was to address
this issue by analyzing the relationship between relative water availability and
economic growth across the counties and key water-using sectors in Wyoming. The
modeling approach was based on Barbier (2002), which depicted the influence of
water utilization on the growth of the economy through a model that included
this congestible public good as a productive input for private producers. The
result was that the aggregate rate of water utilization by all producers was
related directly to the growth of the economy. In Barbier (2002), this
relationship was empirically tested through a statistical analysis across
countries, and allowing for the fact that some countries face moderate or
extreme conditions of water stress. The aim of this research was to modify the
water-growth model and apply it to the state of Wyoming. Two types of analysis
were envisioned. The first involved examining empirically the relationship
between the rate of water utilization and economic growth across the individual
counties of Wyoming and over time (i.e. annually). The degree of water stress
faced by certain counties in some years was incorporated specifically into the
analysis. The second analysis also involved examining the water-growth
relationship over time but for the three main water-using sectors in Wyoming's
economy: irrigated agriculture (i.e. the annual crop sector), irrigated fodder
(i.e. the ranching sector) and the minerals/energy sector. Both the county and
sector-level analyses not only revealed the extent to which overall
economic growth in Wyoming was affected by water availability relative to use
but also identified those counties and sectors whose economic development was
especially at risk from water scarcity. Such information may be critical to
future water use planning in Wyoming, and for the design and implementation of
institutional and allocation mechanisms for water supply in the state.